Global Markets: Investors breathe easy as China acts to contain virus

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TOKYO/SINGAPORE/ SHANGHAI
Global markets were seen rebounding on Wednesday after China unveiled measures to contain the spread of a new strain of coronavirus that has killed nine people in the East Asian country so far. This comes a day after global investors grew increasingly alarmed of signs of another SARS-like epidemic, prompting them to engage in a market wide sell-off and move their investments to less riskier assets.
European markets were higher on Wednesday, with the pan-European Stoxx 600 edging up 0.2 per cent. Asian stocks recovered ground overnight after sharp declines, with the Shanghai Composite index rebounding from an early 1.4 per cent drop to end up 0.3 per cent. Japan’s Nikkei, South Korea’s Kospi index and Hong Kong’s Hang Seng all rose by more than half a percentage point.
The MSCI index of Asia-Pacific shares outside Japan rose 0.71 per cent – recouping almost half Tuesday’s drop – as worries about contagion particularly as millions travel for Lunar New Year festivities knocked stocks from record peaks. Australia’s S&P/ASX 200 shrugged off worries to hit a fresh record high. US S&P 500, Dow futures were seen rising. Markets elsewhere advanced, while safe assets such as gold, bonds and the Japanese yen handed back some of Tuesday’s gains.
“Pandemic, as opposed to epidemic, is the real bottom line – as long as the market sees the former as a concrete risk, impact on prices of risk assets can be meaningful and, more crucially, such impact will last as long as the number of reported case is not visibly trending down,” said Stéphane Barbier de la Serre, macro strategist at Makor Capital Markets.
The outbreak has revived memories of the Severe Acute Respiratory Syndrome (SARS) epidemic in 2002-03, a coronavirus outbreak that killed nearly 800 people and hurt world travel. But in contrast to the initial cover-up of the SARS outbreak, China’s response helped reassure investors concerned about the possible global fallout.
China’s National Health Commission said on Wednesday there were 440 cases of the new virus, with nine deaths so far. Measures are now in place to minimise public gatherings in the most-affected regions. However, cautious stock swings indicate that markets will remain attuned to news out of China.
“While details of the coronavirus are scant, we reckon that the SARS period could offer some clues as to how markets could pan out,” analysts at DBS Bank said in a client note. “The trends are clear: Yields and stock prices fell in the first few months of the SARS outbreak and rebounded thereafter.” “Bear in mind, that, at this stage, the latest SARS-related outbreak seems to be less virulent and deadly than in the 2003 episode and, also, more efficiently addressed by public and medical authorities out there,” Barbier de la Serre added.
The World Health Organization convened a panel of experts in Geneva, Switzerland to assess whether the outbreak constitutes an international health emergency and what measures should be taken to manage it. So far, the WHO has not recommended trade or travel restrictions, but a panel of independent experts could do so or make other recommendations to limit spread.
The last time WHO declared a global health emergency was in 2019 for the Ebola outbreak in eastern Congo that killed more than 2,000 people. The agency also declared global emergencies for the 2016 Zika virus, the 2014 polio and Ebola outbreaks and the H1N1 swine flu in 2009.
There also has been one reported case in the United States, with a man diagnosed after recently travelling to China. But US health officials said he sought care quickly after monitoring news about the virus and is in good condition, and that he has been hospitalized out of an abundance of caution. Corona viruses are a large family of viruses that usually affect animals but can sometimes evolve and spread to humans. Symptoms in humans include fever, coughing and shortness of breath, which can progress to pneumonia.

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